But also, the Xbox 360 had faster hardware than a PSP. Xbox 360 can handle multi-layered audio+video assets rendered in realtime at 60fps - even the prior generation Xbox console could handle it, https://www.youtube.com/watch?v=fvcxnTM-hfw as one of many examples

The Xbox dashboard is slow because of Microsoft's business goals for it, not because the Xbox 360 hardware or software struggles with HD-sized JPEGs or whatever.